In
an article by Thelma Nwagboso “Mediate
or Else”, the writer provides a useful guide to cases where
the courts have considered the costs consequences of a party
refusing to mediate. The Court of Appeal has recently again had to
consider whether the costs of an appeal should be awarded to the
successful appellants (here the Defendants), notwithstanding the
fact that they had rejected the Claimant’s offer to mediate the
matter: Valentine v Allen & Others [2003] EWCA Civ 915
(substantive hearing) and LTL 29/074/2003 (costs hearing).

DUNNETT
v RAILTRACK PLC

A
similar situation had arisen in Dunnett v Railtrack (2002) EWCA
Civ 302; (2002) to All ER 850. Briefly, Miss Dunnett sought
leave to appeal against a judgment given by the Court of first
instance in favour of Railtrack. When the Judge granted her that
permission, he put it to the parties that they should attempt to
resolve the matter by arbitration or mediation. Subsequently,
Railtrack refused to do so. At the appeal, the Court of Appeal
found in Railtrack’s favour but took the view that, despite its
success, it would be highly inappropriate to compel Miss Dunnett
to pay Railtrack’s costs because it had refused to mediate.

LEICESTER
CIRCUITS LTD v COATES BROTHERS PLC

If
you refuse to participate in a mediation that you have already
agreed to attend, you may be penalised in costs even if your case
is ultimately successful. A successful appellant suffered
this fate in the Court of Appeal earlier this month (Leicester
Circuits Ltd v Coates Brothers plc [2003] EWCA Civ 333) as a
result of its withdrawal from a mediation to which it had
previously agreed, just 2 days before it was to take place.

Considering
the parties' attitude toward mediation, and relying upon the
judgment in Dunnett v Railtrack [2002] 1 WLR 2434, the Court made
it clear that having agreed to mediation, it was not open to a
party to withdraw from it because they thought it had no realistic
prospect of success. While the Court did not assume that the
mediation in this case would have been successful, there
was a prospect it would have been, if it had been allowed to
proceed. As a result, this impacted upon the issue of costs. While
the appellant was awarded costs of the appeal, it was only
entitled to its costs of the proceedings up until the date it
agreed to mediate, losing out on the costs of trial preparation
and the trial itself.

CONCLUSION

The
case shows that, where there has been a refusal to mediate, the
courts will look at the surrounding circumstances and the
parties’ behaviour so that they can take a view as to whether
that refusal is reasonable. If the court considers that it is
reasonable as was the case of Watson & Wyatt v Maxwell
Batley and Hurst v Leeming [2002] EWHC 1051 (CH)), then there
is no reason to deviate from the usual order as to costs. The
message to any party involved in a dispute is clear: it should
think carefully before it turns down an offer to mediate. Equally,
you should not agree to a mediation unless you intend to proceed
with it.